Heineken’s Nigeria Unit to Raise $502 Million to Support Growth

heinekenNigerian Breweries Plc, the West African nation’s largest brewer, said it plans to sell 100 billion naira ($502 million) in debt to boost liquidity and support growth even as lower crude prices impact spending in the continent’s most populous country.

The debt sale, expected by Oct. 8, will enable the company to diversify its funding and attract non-bank investors, Finance Director Mark Rutten said in an e-mailed statement on Wednesday. The move demonstrates the Heineken N.V unit’s commitment to Nigeria, where it owns 11 breweries, Managing Director Nicolaas Vervelde said.

The fundraising comes as Nigeria suffers from lower crude prices, causing slower economic growth and declining government revenues. Lagos-based Nigerian Breweries reported lower first-half profit in July, while smaller competitor Guinness Nigeria Plc said earlier this month that the economic situation had hurt consumption of pricier beer brands.

Nigerian Breweries shares rose 0.7 percent to 148 naira as of 1.40 p.m. in Lagos. The stock has declined 10 percent this year, compared with an 11 percent drop in the 179-member Nigerian Stock Exchange All-Share Index. Guinness Nigeria, a unit of London-based Diageo Plc, is down 4.9 percent.

Bloomberg

Diageo Makes Offer to Increase Stake in Guinness Nigeria

Diageo PLC said it has approached the board of Guinness Nigeria PLC with a roughly $208 million offer to increase its stake in the listed Nigerian company that houses Diageo’s beer brands in the country.

guinessDiageo has offered to increase its stake in Nigerian Stock Exchange- listed Guinness Nigeria—which houses brands like Guinness, Harp and Malt—to 70% from 54.3% as the world’s largest spirits company looks to wield more control over its African business.

London-headquartered Diageo, which makes Smirnoff vodka and Johnnie Walker whisky, said it has proposed launching a tender offer to buy shares in Guinness Nigeria from shareholders for a per-share price of 175 Nigerian naira (roughly 88 cents) in cash, or a 40% premium to the company’s closing price on Tuesday.

The company said it could also look to acquire shares in the market for 175 naira per share or below if a deal is approved. The proposed deal would be subject to regulatory approval by the Nigerian Stock Exchange and the Nigerian Securities and Exchange Commission.

The move comes after Diageo in July said it would terminate its partnership with Heineken NV in South Africa, saying it had the necessary scale to grow on its own in the country.

Africa has emerged as a rare bright spot for Diageo, which in July reported a 0.8% drop in operating profit for the fiscal year ended June 30 amid weaker sales in North America, the Asia-Pacific region, Latin America and the Caribbean. In Africa, discounting the effect of acquisitions and currency fluctuations, sales rose 6%.

Liquor-focused Diageo has faced years of speculation as to whether it will eventually sell Guinness, but the company publicly insists that having a beer business in Africa is an essential part of its plan to drive growth in its less developed spirits business on the continent.

Nigeria and East Africa, including beer and spirits, made up between 3% to 6% of Diageo’s net sales last fiscal year. On Thursday, Guinness Nigeria reported a 9% rise in net sales for the year ended June 30.

WSJ